US, Saudi Arabia reach tentative pacts potentially worth $110 billion

Steven Mufson The Washington Post

Published 7:24 pm, Saturday, May 20, 2017

A month ago, Secretary of State Rex Tillerson delivered a brief speech at the U.S.-Saudi Arabia CEO summit with a succinct message: “One of our policy priorities is to get better deals for the United States.”

On Saturday, Saudi Arabia seemed to deliver. The kingdom signed tentative agreements that the Trump administration said could be worth $110 billion, including fighter jets, ships and missiles, as well as energy technology, health-care expertise, job training and a $40 billion joint infrastructure investment fund.

But a huge portion of the dollar figure reflects money invested in and goods made in the KSA, the kingdom of Saudi Arabia, not in the USA.

The government extracted commitments from U.S. companies to create more of their jobs and manufacture more of their goods in Saudi Arabia. Saudi Aramco alone said it inked $50 billion in agreements largely aimed at boosting local content and jobs.

It is all part of Vision 2030, Deputy Crown Prince Mohammed bin Salman’s plan for transforming the Saudi economy, diversifying away from petroleum and providing work for the kingdom’s restless unemployed. The 2030 plan aims to build up the share of non-oil exports from the current level of 16 percent to 50 percent.

Most of the deals unveiled Saturday were memorandums of understanding rather than solid contracts, and thus still require further negotiation. Some have been in progress for months. But the figures were ambitious.

Lockheed Martin said that Saudi Arabia “has expressed its intent to procure more than $28 billion worth of Lockheed Martin integrated air and missile defense, combat ship, tactical aircraft and rotary wing technologies and programs.” Lockheed Martin chief executive Marillyn Hewson said she hoped to “strengthen the cause of peace in the region.”

Hewson also said that Lockheed would form a joint venture with state-owned Taqnia to complete 150 S-70 Black Hawk helicopters. The venture would support 450 jobs at Lockheed’s Sikorsky subsidiary in Connecticut and 450 jobs in the kingdom, transferring some technology and skills to Saudi Arabia. “These agreements will directly contribute to His Majesty’s Vision 2030 by opening the door for thousands of highly skilled jobs in new economic sectors,” she said.

General Electric said it signed memorandums of understanding for the sale of $7 billion of GE technology and for the training of Saudi citizens in cloud-based data skills and expertise in the health-care industry. GE would also help improve efficiency in manufacturing, the state mining company and Saudi Aramco. Aramco said it expected GE to create 250 high-tech Saudi jobs.

The New York-based investment firm Blackstone announced a plan to create a $40 billion infrastructure investment fund with half the seed money coming from the Public Investment Fund of Saudi Arabia and half to be raised from other investors. Blackstone chief executive Steve Schwarzman has advised Donald Trump.

While Blackstone issued a statement Saturday during Trump’s trip to Riyadh, the firm noted that the agreement was “the culmination” of talks that began a year ago - when Barack Obama was still in office and the presidential primaries were not over. Moreover, the memorandum of understanding was “non-binding,” Blackstone said in a statement, adding that “the parties will continue their negotiation.”

Blackstone said it hopes to leverage the fund and invest more than $100 billion in infrastructure projects, “principally” but not exclusively in the United States.

Saudi Aramco announced tentative agreements with several firms, each designed to create hundreds or thousands of local jobs. The state oil company said it had signed MOUs with oil service giants Schlumberger, Halliburton, Weatherford and Baker Hughes to localize oil field goods and services and create a total of 4,850 jobs in the kingdom.

Saudi Aramco also said National Oilwell Varco would form a joint venture to manufacture land rigs and drilling equipment in Saudi Arabia, and establish a training center for local workers, ultimately creating 1,000 jobs. Jacobs Engineering would form a joint venture with Aramco to manage construction projects and create 3,000 jobs there.

Honeywell, which has done business in Saudi Arabia for decades, signed two MOUs with Saudi Aramco, pledging to help fulfill the In-Kingdom Total Value Add Program to localize content by 2021.